By Justine Irish D. Tabile, Senior Reporter
THE NATIONAL GOVERNMENT (NG) expects value-added tax (VAT) and related sales tax collections to rise by 12.8% in 2027, outpacing overall tax revenue growth despite the current weakness in household consumption.
The 2027 Budget of Expenditures and Sources of Financing (BESF) showed that the VAT and related sales tax collections are expected to increase to P860.03 billion next year from the P762.42-billion program for 2026.
The tally covers VAT and related sales taxes collected by the Bureau of Internal Revenue (BIR), net of VAT refunds, but excludes VAT on imports collected by the Bureau of Customs (BoC).
Overall tax revenues are projected to grow by 9.2% to P4.85 trillion in 2027 from the P4.44-trillion program for 2026.
Taxes on domestic goods and services, which include VAT, excise taxes, and taxes on selected services, are projected to jump by 11.3% to P1.75 trillion in 2027 from the P1.57-trillion program for 2026. The P177.18-billion increase would account for 43.3% of the projected P409.23-billion rise in overall tax revenues.
The projected P97.61-billion rise in VAT and related sales tax collections next year would account for 23.9% of the overall increase in tax revenues and 55.1% of the increase in taxes on domestic goods and services.
VAT would also post the fastest growth among the components of taxes on domestic goods and services.
Excise tax collections are projected to jump by 8.9% to P380.86 billion next year, while taxes on selected services are seen increasing by 9.1% to P164.39 billion.
Philippine Institute for Development Studies Senior Research Fellow John Paolo R. Rivera said the projected increase in tax revenues assumes faster household consumption and economic activity in 2027.
“It is achievable if domestic demand and imports recover next year. It likely assumes stronger household consumption, firmer business activity, and better tax administration and compliance,” he told BusinessWorld via Viber.
Mr. Rivera said the Development Budget Coordination Committee earlier attributed the higher revenue targets for 2027 to tax reforms, digitalization, and enforcement.
For 2027, the government projects revenues to go up by 8.3% to P5.21 trillion, equivalent to 15.7% of gross domestic product (GDP).
“So, yes, the target does imply an expectation that domestic demand improves in 2027, but not necessarily a consumption boom. Part of the increase can also come from better collection efficiency and a broader tax base,” he added.
However, Mr. Rivera said the revenue outlook faces risks from weaker-than-expected consumption, slower investment, softer imports, and another external shock that keeps growth subdued.
The BESF projections already incorporate proceeds from legislated tax reform measures. These measures are projected to have a net revenue impact of P31.96 billion in 2027, up from the P29.47-billion program this year.
VAT on digital services is projected to generate P24.67 billion, the largest amount among these measures, while the Rationalization of the Mining Fiscal Regime and the excise tax on pickup trucks are expected to yield P6.1 billion and P7.44 billion, respectively.
These gains would be partly offset by estimated revenue losses of P4.61 billion from the Capital Markets Efficiency Promotion Act and P1.65 billion from the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act.
However, the Department of Budget and Management said they do not yet account for the proposed tax-relief and revenue-generating measures under the Promoting Growth, Revenue, and Equity towards Socio-economic Sustainability tax package.
Estimates by the Department of Finance showed that the proposed measures would generate an average of P47.94 billion in net additional revenues annually from 2027 to 2030.
BIR COLLECTIONS
Meanwhile, the Bureau of Internal Revenue collected P2.003 trillion from January to July, exceeding its P1.99-trillion target for the period by P13.53 billion or 0.68%. The seven-month tally was 5.4% higher than a year earlier.
BIR Commissioner Charlito Martin R. Mendoza said the agency had already collected around 60% of its full-year target for 2026, reflecting improving taxpayer compliance and sustained collection efforts.
For July alone, gross collections reached P358.44 billion, exceeding the P336.07-billion target by P22.37 billion or 6.66% and 5.73% higher than a year earlier.
“These results show that better taxpayer service, clearer rules, and effective enforcement can support stronger compliance and collection,” Mr. Mendoza said.
The BIR said its reform agenda includes simplifying tax rules and processes, expanding digital services, improving taxpayer assistance, strengthening audit safeguards, and enforcing tax laws against deliberate noncompliance.
Under the BESF, the BIR is projected to collect P3.736 trillion in 2027, up 10.1% from the P3.393-trillion program for 2026.
PESO DEPRECIATION
Meanwhile, the BESF showed that a P1 depreciation against the US dollar could narrow the NG’s 2027 budget deficit by P5.7 billion, as higher revenues are expected to more than offset increased disbursements.
The government expects the budget deficit to widen in nominal terms to P1.695 trillion in 2027 from the P1.659-trillion program this year. However, the deficit-to-GDP ratio is projected to fall to 5.1% from 5.4%.
The sensitivity analysis showed that a P1 depreciation would increase revenues by P10.6 billion while raising disbursements by P4.9 billion.
The sensitivity estimate measures the effect of a P1 change from the government’s baseline exchange rate assumption. The government assumes a peso-dollar exchange rate of P60 to P62 from 2026 to 2029.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said a weaker peso would increase the peso value of interest payments on US dollar- and other foreign currency-denominated debt.
On the revenue side, he said the increase would be “largely linked to import tax-related revenues, especially at the BoC.”
According to the BESF, import VAT collections are projected to rise by 5.6% to P692.31 billion in 2027 from the P655.89-billion program this year.
Mr. Ricafort said the larger impact on revenues than on disbursements could partly reflect the government’s domestic-heavy debt portfolio.
“A bigger share of domestic borrowings in the total borrowing mix in recent years may have helped,” he added.
The NG’s outstanding debt rose by 2.8% to P19.07 trillion at end-June from P18.55 trillion at end-May. Domestic obligations accounted for 67.33% of the debt stock, while the remaining 32.67% came from external sources.
The government plans to raise P3.304 trillion in gross borrowings in 2027, a 20.9% increase from the P2.734-trillion program this year.
Of the proposed gross borrowings, 72.3% would be from domestic sources. Gross domestic borrowings are projected to increase by 24.5% to P2.389 trillion from this year’s P1.918-trillion program.
The remaining P914.982 billion would be raised from external sources, up 12.2% from the P815.505-billion program for 2026.
